The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

RBA's rate decision due just before the Melbourne Cup

Picking the result of the Reserve Bank's monthly board meeting is turning out to be just as difficult as backing the Melbourne Cup winner.

A month ago when the central bank board last met it looked like the official cash rate would be on hold at an all-time low of two per cent indefinitely.

Since then the four big banks have unexpectedly raised their mortgage rates to cover the cost of new prudential rules, while inflation figures have proved extremely benign and there are further signs that the housing market has lost its froth.

Economists now see the November rate decision as more finely balanced with the possibility of a reduction to 1.75 per cent.

RBA governor Glenn Stevens will announce the rate decision at 2.30pm, a half hour before the big race.